SEATTLE — Warning lights are flashing for Washington’s economy.

Job growth has been slower than expected, and the unemployment rate is above the national average. There are mounting layoffs in the tech sector. And more and more businesses are considering leaving the state. Starbucks’ recent decision to expand in Nashville stung in Seattle.

This all comes after back-to-back legislative sessions that have seen Democrats and Gov. Bob Ferguson resort to tax hikes and spending cuts to fill budget shortfalls. Another gap looms in 2027. Credit ratings agencies recently put the state on notice, citing one-time maneuvers that have been part of the fiscal balancing act in Olympia.

Against this backdrop, Ferguson on Thursday signed an executive order creating a Governor’s Economic Development Council that will advise him and help draft a statewide economic development plan by June next year.

One objective is to make recommendations to market Washington as a destination for out-of-state businesses. Another is to identify barriers to growth that lie in state regulations.

Only a few weeks ago, Montana Gov. Greg Gianforte was touting his state as a destination for businesses looking for an alternative to “high-tax, high-regulation blue states,” after Washington-based Janicki Industries announced an $800 million expansion there.

The 26-member council will serve as a venue for “candid discussions,” Ferguson said, adding that he plans to attend every quarterly meeting. The Democratic governor said Washington hasn’t convened such a panel in two decades.

Still, Ferguson said Washington has a “lot to be proud of,” citing strong national rankings for the state’s economy and productivity.

“But we cannot take our strength for granted, and indeed we have many challenges,” he said before signing the order. “Too many Washingtonians are out of work. Our state is unaffordable for too many Washingtonians, and we have areas where those rankings are not so good.”

The council is also tasked with evaluating the competitiveness of Washington’s economy compared to other states and identifying strategies to increase jobs.

Leaders from Microsoft, Boeing, Puget Sound Energy, the Washington State Labor Council and the state’s Building and Construction Trades Council are among those who will serve on the panel. Lt. Gov. Denny Heck is the lone elected state official, aside from Ferguson.

Too little, too late?

Business interests have been increasingly critical of Ferguson and Washington Democrats during the governor’s first year-and-a-half in office, chafing over billions of dollars in new and increased taxes pushed through to fill a budget shortfall in 2025 and a regulatory climate they describe as onerous.

Nearly three in four respondents to an Association of Washington Business survey this spring reported their tax burden as a top business challenge, up 18% since winter 2025. Just 7% rated Washington’s economy as strong or very strong, with almost half expecting a recession in the next year. Their feelings about Washington’s standing were worse than their thoughts on the national economy.

Joe Fain, president and CEO of the Bellevue Chamber of Commerce and a former Washington state senator, believes the state can get on a stronger economic track.

“I’m optimistic that the governor is taking a serious problem seriously,” said Fain, who is not on the panel.

“Many say it’s too late. But if our elected leaders take what comes out of this effort seriously and are honest about how high costs and complex regulations are hurting businesses of all sizes, Washington can still control its own destiny,” he said.

Morgan Irwin, vice president of government affairs at the Association of Washington Business, said he hopes state leaders have the will to change course.

“I think that we have the people in place here to make a real difference, but that’s going to take upsetting some of our friends,” said Irwin, whose boss is on the new council.

Mike Katz, chief business and product officer for T-Mobile, will serve on the panel. He hopes to provide feedback about “some of the unintended consequences” of state leaders’ decisions. He wants a more predictable business environment, and said ever-changing state policies can put the Bellevue-based company at a disadvantage nationally.

“That’s been one of the hardest things for us is the unpredictability of the changes on a year-over-year basis for our employees,” he said. “They don’t want to live through the unpredictability of not knowing what next year has to hold, whether it’s with taxes or anything else, and I would say the same for the company.”

Last month, former Democratic Gov. Christine Gregoire noted as much during an Association of Washington Business meeting: “We have lived on luck. We are overspending. We are not allowing businesses to be able to predict tomorrow, and that is not healthy.”

Ferguson argues he’s already done some work to boost economic development, such as using reserve funds to create jobs in quantum computing and other sectors, spearheading investments in housing construction and signing another executive order on his first day in office to cut down on the time it takes to get a state permit.

But some of his fiercest critics remain unconvinced by those efforts or the new council.

“Ferguson doesn’t need to spend more taxpayer dollars to form a committee to study something that Washington State already had figured out,” said Brian Heywood, a hedge fund manager and founder of the conservative political committee Let’s Go Washington.

“The state knew the answer when I moved here 16 years ago: make it easy to build houses and businesses, reduce regulations, and eliminate unnecessary taxes — and he can start with the unconstitutional income tax,” Heywood said.

The group is gathering signatures for an initiative to repeal the income tax on high earners that lawmakers and Ferguson approved earlier this year.

Looking to 2027

Washington officials will learn Friday from the state economist how revenues are doing, giving a preliminary sense of the shortfall they’ll face as Ferguson drafts his first two-year budget proposal for the Legislature to consider early next year.

Ferguson has committed to not proposing new taxes in his proposal, which he said will grapple with “in all likelihood, a multibillion-dollar shortfall.” He said he’ll be focused on budget cuts, especially on newer programs launched since 2019.

He acknowledged the concerns from credit rating agencies that Washington is spending more than it takes in and tapping reserves to make ends meet. A top priority in budget talks for him will be ensuring the state’s sterling bond rating is preserved, as a downgrade would increase interest rates on state borrowing and add millions of dollars in new costs.

“We need to make sure we’re addressing our long-term budget situation in a sustainable way,” Ferguson said. “It’s easy for me to say that. It’ll be challenging to do it, but that’ll be my goal.”

He expects that the budget lawmakers deliver to him to sign in 2027 won’t include tax hikes, but stopped short of committing to veto tax proposals at this early stage.

“We have a long way to go,” Ferguson said.

The governor also said the Legislature, which is controlled by heavy Democratic majorities in both chambers, needs to “refocus on the impact of policies that are adopted and what that impact is on the business community.”

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News Source : https://www.opb.org/article/2026/06/26/washington-economy-governor-executive-order-development-plan/